CHAMPIONSHIP CLUBS DOUBLE DOWN ON PREMIER LEAGUE GAMBLE
Premier League 2 unlikely to happen
London 18th October 2018
A Premier League 2 is unlikely to happen as it would be “like turkeys voting for Christmas”, say financial analysts vysyble.
Leeds chairman Andrea Radrizzani last week called for the creation of a second-tier English Premier League (EPL) to address the massive financial discrepancies between teams in the top two divisions of English football.But the formation of an English Premier League 2 (EPL2) would require a majority vote from EPL clubs along with a probable dilution of their current media rights revenue to part-fund it, making such a move highly doubtful.
And, say vysyble, evidence suggests the biggest EPL clubs and TV companies are actually more likely to push for a more lucrative breakaway European Super League.
vysyble’s Roger Bell said: “Given the EPL media rights revenue from the new domestic TV cycle starting in 2019 is, by our estimates, dropping from £10.19million to £7.76million per broadcast game, we think an EPL2 will find it very difficult to source additional media rights money.
“As EPL clubs would have to vote for it and would likely have to give up some of their diminishing future revenue to initially part-fund it, this would be like turkeys voting for Christmas – and as such we just can’t see it getting off the ground.”
Using the latest available accounts, vysyble’s research has found that the three English Football League (EFL) clubs promoted from the Championship to the EPL at the end of the 2016-17 season made record losses in doing so.Newcastle United, Brighton & Hove Albion and Huddersfield Town achieved losses of £11.18million a month (£2.58million a week) between them after all the costs of doing business and tax were taken into account.
According to vysyble’s report ‘Over the Line 2’ released today, this was a colossal 138% increase from the losses suffered collectively by Burnley, Middlesbrough and Hull the year before, of £4.71million a month, or £1.08million a week.
Since 2009 only one club has achieved both promotion and an economic profit in the same year, meaning the pursuit of Premier League status is a predominantly loss-making exercise.
Roger Bell said: “The attraction of the Premier League’s record annual revenues of more than £4.5bn due to the new 2016-19 domestic TV cycle is proving to be an irresistible force for some Championship clubs, regardless of the financial impact, and our latest numbers show a clear relationship. Owners are prepared to throw caution to the wind into achieving promotion. The successful clubs for 2016-17 lost £102 for every £100 of revenue during their promotion campaign, which is disturbing.
“With current annual TV revenues of just £88m per year for the EFL as a whole, owners have to dig deep to compete and inevitably some will fall by the wayside.
“Championship clubs can ill-afford to maintain operations at their current levels and the increasing uncertainty over the future direction and structure of the European game heightens risk levels even further.
“The current financial dynamic within the Championship is not only worrying but wholly unsustainable.
“A ‘Premier League 2’ option is not the answer without major surgery to existing media rights contractual formats and club operating practices.”
vysyble also point out that getting to the EPL is unlikely to help clubs financially, as a large percentage are soon relegated back, having spent huge sums trying to stay in the division.
Roger Bell added: “EFL clubs continue to risk their futures by chasing the Premier League’s financial dream but, as our other work on Premier League club finances demonstrate, it is actually more likely to end up as a financial nightmare.
“The consequences are that when relegation occurs – which it does for one in three promoted clubs in the first season in Premier League – subsequent parachute payments are more likely to be used to repair the balance sheet rather than quickly chasing promotion.
“Of the 21 instances of relegation between 2009-15, 14 have spent three or more seasons outside of the top flight up to 2018-19 following a relegation, showing parachute payments are far from a guarantee of immediate promotion.”
Between 2009-17, 21 clubs gained promotion with Hull City, Newcastle United, Norwich City and QPR each experiencing two promotion-winning seasons and Burnley three.
All of them bar Crystal Palace in 2012-13 achieved economic losses in their promotion seasons, while the largest economic loss sustained during a promotion season was £62.50million by Newcastle United in 2016-17 followed by Brighton & Hove Albion (£51.18m) in the same season.
Detailed information about the Over the Line 2 report can be found here.
Twitter discussion thread – #otline2